Answer :
Answer:
It should prioritize Product 2 as his contribution per machine hour is greater.
Explanation:
[tex]\left[\begin{array}{ccc}$Concept&$Product 1&$Product 2\\$CM&44.25&35.5\\$Constrain resource&0.15&0.1\\$CM per MH&295&355\\\end{array}\right][/tex]
We will divide the contribution per unit over the amount of machine hours used to produced.
This will provide us by the contribution per Machine Hour
As Product 2 has a higher contribution per machine hoursi s better to produced with preference over Product 1
Contributed per machine hour is calculated to understand the contribution margin per machine hour. Thus, in this case, the contribution margin per machine hour in product 2 is more than product 1.
What does the contribution margin per machine hour mean?
Sales revenue less variable cost gives us contribution margin. A period of one year is usually calculated. The contribution limit is the amount you use to pay for fixed expenses, such as salaries, rent, insurance, and other expenses that remain that month during the month out.
As per the given information,
Unit Contribution of product 1 is $44.25 and Machine hours at 0.15
Unit Contribution of product 2 is $ 35.50 and machine hours at 0.10.
Therefore,
[tex]\rm\,Contribution\,margin\,per\,machine\,hour = \dfrac{Contribution\,margin\,per\,unit}{Number\,of \,machine\,hours}\\\\= \dfrac{44.25}{0.15}\\\\= \$ 295 \rm\,(contribution\,margin\,per\,machine\,hour \,in case\,of\,product\,1)\\[/tex]
Contribution margin per machine hour in case of Product 2:
[tex]\rm\,Contribution\,margin\,per\,machine\,hour\,Product\,2= \dfrac{Contribution\,margin\,per\,unit}{Number\,of \,machine\,hours}\\\\= \dfrac{35.50}{0.10}\\\\= \$ 355[/tex]
Hence, the contribution per machine hour is more in the case of product 2 in comparison to product 1. Therefore, the company should produce Product 2.
To learn more about contribution margin, refer to the link:
https://brainly.com/question/24881206